I compare the wealth of private firm owners that exit their firms through reverse mergers (RMs) to the wealth that could have been obtained in initial public offerings (IPOs), sellouts, or by remaining private. Private firm owners that use the RM exit mechanism have significantly less post-exit wealth than the wealth that could have been obtained in an IPO. This result is driven by differences in the pre-exit characteristics of firms that choose a RM compared to an IPO (a selection effect), not by use of the RM exit mechanism itself (a treatment effect). The gap between post-exit wealth and the wealth that could have been obtained in an IPO disappears for owners of RM firms whose pre-exit characteristics are sufficiently similar to propensity-score matched IPO firms. The post-exit wealth of RM firm owners is approximately the same as the wealth that could have been obtained in a sellout. The median change in private firm owner wealth as a result of the RM is positive when pre-exit private firm values are inferred from valuations in private–private takeovers. However, the median change in wealth is negative when pre-exit private firm values are obtained from valuations provided in fairness opinions. These conflicting findings appear to be driven by upwardly biased fairness opinion valuations.

We examine the relation between corporate social responsibility (CSR) and firm value using the takeover market as an empirical setting. Firms with high or low CSR scores experience a greater likelihood of takeover and lower wealth gains in takeovers relative to firms with moderate policies. These findings indicate that the takeover market acts as a corrective mechanism for firms that over- or under-invest in CSR. Our results are robust to controlling for governance and alternative motivations for mergers and are evident in sub-samples where CSR is arguably more important. Our findings are not driven by poor management of target firms. Overall, the evidence suggests that CSR generally benefits shareholders, however, very high or low CSR scores appear to be harmful.

We examine stock market reactions, direct costs of compliance, and board adjustments to California Senate Bill No. 826 (SB 826), the first mandated board gender diversity quota in the United States. Announcement returns average −1.2% and are robust to the use of multiple methodologies. Returns are more negative when the gap between the mandated number and the pre-SB 826 number of female directors is larger. These negative effects are less severe for firms with a greater supply of female candidates, and for those that can more easily replace male directors or attract female directors. For small firms, the annual direct cost of compliance through board expansion is non-trivial, representing 0.76% of market value. Following SB 826, firms significantly increase female board representation, and the increase is greater for firms in California than control firms in other states.

We examine California Assembly Bill No. 979 (AB 979), the first law mandating racial, ethnic, and other forms of diversity on corporate boards. Conventional t-tests show that stock returns around the enactment of the law are negative, economically large, and statistically significant; returns are more negative for smaller firms and firms with no diverse directors, suggesting higher compliance costs. However, statistical significance disappears after controlling for event date cross-correlation, when comparing returns on event dates to the pre-event distribution of returns, and in multivariate regressions. At least 90 % of firms comply with the first stage of AB 979 and the qualifications of mandated directors are largely similar to those of benchmarks, suggesting compliance costs are low. We also find no evidence that compliance affects firm operating performance. Overall, our results suggest that the diversity mandate has statistically and economically small effects relative to typical variation in stock returns and firm outcomes, which highlights the importance of considering appropriate counterfactuals and examining multiple dimensions when analyzing the impact of such mandates.